ABB Limited - Possible recovery already priced in! - Antique

ABB reported marginally lower than expected 1QCY13 performance, largely due to forex loss of ~INR210m and muted revenue growth due to delay in execution of projects. Order inflow declined by 7.9% YoY to INR15.3bn. Management highlighted the weakness in orders from traditional business while growth in short cycle orders like Solar, building and railway segment was good. The internal cost efficiency led to improvement in profitability of 10bps on YoY and 278bps on QoQ basis. The company continues to focus on cashflows and profitability while revenue growth is expected to remain weak. Even after factoring in a significant turnaround in performance going ahead, which we believe would be difficult considering no large orders in market, valuations are rich with the stock trading at a P/E of 31.0x its CY13e earnings. Maintain SELL.

Valuation and Outlook

At CMP of INR536, the stock is trading at 31x CY13 earnings and P/BV of 4.3xCY12. We have valued the company at 30xCY13 earnings with target price of INR519. We maintain SELL considering expensive valuation.

Source : Equity Bulls

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